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Choosing A Forex Strategy
Technical analysis and fundamental analysis are the two basic
areas of strategy in the FOREX market which is the exact same as
in the equity markets. However, technical analysis is by far the
most common strategy that is used by individual FOREX...
E Gold Investments: Investing Smartly With E-Currency Exchange
Investors are now starting to move their investments to the most
recent investment trend: Making money with E-gold.
When you make an investment in E gold is a all about a
profitable system that allows you to capitalize from the money
that is...
The Key To Protecting Your Money
Have you ever experienced a major paradigm shift? You know, the
kind where you think you already know something about
something...
But suddenly, you learn something new about that 'something'
that changes your whole perspective and outlook...
Trading Forex To Advance Your Financial Position
Everyday, currencies are traded in an international foreign exchange market, otherwise known as the forex market, with the main marketplaces (otherwise known as bourses) existing in the world’s financial centes New York, London, Tokyo, Frankfurt and...
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By now we are all familiar with the decreasing value of the US dollar. What you don't know about this situation could hurt you. Learn why this is happening, what the implications are for your retirement portfolios, and...
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Forex Broker Commissions
Most forex brokers do not charge commissions. GFT Forex Brokers, like other forex brokers, are compensated by revenues from their activities as currency dealers, including proceeds from buying, selling, converting and holding currencies, interest on deposited funds, and rollover fees.
Many may wonder how brokers work without commissions. The forex dealer is like a middleman. Let's consider the case of a bread middleman. He buys bread at a “wholesale” price and he sells it at a “retail” price. So if one is a baker, he can ask the middleman how much he would buy his bread for. Let's say the middleman quotes $1, so he's willing to pay $1 per loaf.
On the other side of the equation, let's say you just finished his last slice of bread, and you needs a new loaf. So you call up the local middleman, and ask him how much he's willing to sell you (a customer) a loaf of bread for. And he quotes the baker $1.25. That sounds reasonable, so you tell him to drop one off for you.
In this example, the bread middleman didn't charge you a commission to either the baker or you, the customer. Instead he bought at one price and sold at another. He will let you buy from him at $1.25, and let you sell to him at $1. So every time the baker has bread to sell, he checks the middleman's sell price. And when you want to buy a loaf of bread, you check the buy price.
In trading,
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this is known as the “bid” and “ask”. The bid is the price you can sell at, and the ask is the price you can buy at.
Considering forex broker commissions, the forex dealer will let the trader buy from him at 1.1971 and will let the trader sell to him at 1.1967. The difference 0.0004 is known as the spread. And this spread is where the forex “middleman” makes his money.
If the trader were to buy at 1.1971, then the instant the trader buys, he is “down” 0.0004, because if the trader wanted out of the trade, the best price he could sell it for is 1.1967. So as the forex dealer takes varying trades from people, each buying or selling, he can make money from this price gap. Each minimum increment, 0.0001 is referred to as a “pip”. So the spread in this example is 4 pips. In terms of dollars, for a forex contract of $100,000, this transaction would cost you $40 ($100,000 x 0.0004) or 4 pips. So the trader will find that some companies will advertise a spread of 3 pips on some currencies, usually ranging up to five on others. In forex trading, the tighter the spread is, the better.
Forex Broker Info provides detailed information on forex brokers, forex trading and market makers, and other forex-related topics. Forex Broker Info is the sister site of Incorporating in Florida Web.
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